Late Night: The Perfect Candidate to Challenge Obama

Lots of liberal groups are calling for Elizabeth Warren to run for the Senate in Massachusetts against Senator Scott Brown. But why not challenge Obama instead? Warren has nothing to lose–Obama already hates her guts and has publicly humiliated her multiple times. What more can he do to her? Running against Obama would give Warren a chance to turn the tables and represent the American people against the top enforcer of the oligarchy.

Today Yves Smith at Naked Capitalism presented a thoughtful, well-argued case for why it would be much better for Warren and for liberals who are disgusted with Obama if she ran for President rather than Senator. It’s a fairly lengthy post and very meaty, so you should read the whole thing.

Yves argues that even though Warren wouldn’t win, she could help elevate the national discourse. If she were running against Obama and debating him, the media would have to cover it, and some of her ideas might make it through the media filter.

And just imagine the debates! Warren would wipe the floor with Obama, exposing his lack of moral values and his pitiful ignorance of basic economics. Obama would be horrified to once again have to compete with a brilliant, competent woman. He might even be forced to sneakily use his middle finger again or pull out his tired sexist remarks. This time more people might notice, now that the koolaid has worn off for so many former Obots.

One quibble I have with Yves is her argument that Warren is “a Reagan-level Great Communicator.” Please. Reagan couldn’t speak off-the-cuff much better than Obama. Did you ever watch one of his press conferences? But Yves is young, and probably grew up under Reagan. I guess I can forgive her for that one. She points out that

unlike Obama, a patrician wannabe who sees Reagan as a role model, she taps into deeply rooted traditional American values, that of a just society. Obama, by contrast, exploited the intense frustration with eight years of misrule by Bush the Second, and his liberal posturing was merely a market positioning exercise, to further differentiate him from Brand Republican.

Her position, which sounds dogmatic leftie to those lacking historical perspective, would have been dead center circa the early to mid 1980s, a Javits/Rockefeller Republican or a pretty tame Democrat of that era.

Hmmm…not quite sure I buy that either, but whatever. She’s right that Warren is no lefty. She’s simply an honest person who has studied what is happening to the American middle class and has the decency to prefer trying to change things to trying to cash in on the greed of bankers.

But here’s the best reason for Warren to run:

Warren also stands for a second set of ideas, that of competence and accountability in government. Not only did she build a major organization in an impressively short period of time, but she understands the importance of what we call in the consulting world “deliverables”, that is, providing tangible evidence of progress. She got various government agencies and banks to agree on a simplified mortgage disclosure form, a “to do” on the banking officialdom’s list that had somehow been too complicated to get done until Warren took it on. And this isn’t just good for consumers, it will also lower costs to banks.

By contrast, not only did Obama make a spectacular set of campaign promises that he failed to honor, he is completely unapologetic about those lies. While there is, sadly, a certain amount of misrepresentation that is considered normal among politicians, Obama’s looks to have set a new standard.

Yes, Warren is competent and efficient–she gets things done. She identifies a problem, and she attacks it doggedly–and she’s tough as nails. She has taken more abuse in the past few years and most people face in a lifetime. And she’s come through unbroken and unbowed.

Yves points out that in comparison to what she might accomplish with a failed primary campaign for President, Warren’s chances of effecting real change in the Senate would be slim to none. As we’ve seen recently, the Senate is utterly dysfunctional and filled with people who are completely out of touch with what is really happening in the country. If Warren tried to actually accomplish something as a freshman Senator, she’d be slapped down in no time flat.

I must say I like this idea. Just to get you thinking about it, here are a couple of videos of Warren making Timmy Geither look like a guilty schoolboy.


The L shaped recovery and a Bogus Debt Crisis

Our economy continues to scuttle across a bottom set by the huge drop in performance during the Great Recession. This economist was not surprised by the lackluster GDP report released today.  No one has used the correct fiscal policy prescription in this country since 1999.  The current batch of Washington nimrods are going to set us at a new low shortly.  We’ll be lucky to see nasty numbers like these a year from now.  It’s as if tanking the economy is job 1 now.

Gross domestic product climbed at a 1.3 percent annual rate following a 0.4 percent gain in the prior quarter that was less than earlier estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 1.8 percent increase. Household purchases, about 70 percent of the economy, rose 0.1 percent.

Treasuries rose as the report dimmed prospects for faster growth in the rest of 2011. The faltering economy may get another blow from spending cuts being negotiated in Congress, keeping pressure on Federal Reserve Chairman Ben S. Bernanke to hold interest rates near zero.

“The second-half rebound is melting away,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, the only forecaster polled to correctly estimate the gain in GDP. “It’s a very, very difficult situation for policy makers. The Fed could give a pretty strong signal that they are not likely to move on interest rates for a very long time.”

The yield on the benchmark 10-year note decreased to 2.85 percent at 1:22 p.m. in New York from 2.95 percent late yesterday. Stocks pared earlier losses on signs that House Speaker John Boehner’s plan to raise the debt ceiling was gaining support. The Standard & Poor’s 500 Index fell 0.3 percent to 1,296.42 after falling as much as 1.4 percent.

Former Labor Secretary Robert Reich tells it like it is in a post that might as well be entitled “It’s the jobs, stupid”.  Too bad he’s not up for the Treasury position now occupied by Secretary Slave to Investment Banks.  There’s a false equivalency being spread about raising the debt ceiling and increasing the deficit that’s really hampering policy discourse right now.  The two things aren’t the same.  The debt is the amount we owe and it builds each year when there is a deficit or when interest accumulates.  The deficit is a shortage in one year’s budget.  The only real crisis we have right now is a jobs crisis and a complete lack of demand. Again, no business person in their right mind is going to create anything if there’s no customers. Oh, there’s also a confederacy of dunces in the US House of Representatives.  But, I won’t go there right now.

Get it? We’re really in a “jobs and growth” crisis – not a budget crisis.

And the best way to get jobs and growth back is for the federal government to spend more right now, not less – for example, by exempting the first $20,000 of income from payroll taxes this year and next, recreating a WPA and Civilian Conservation Corps, creating an infrastructure bank, providing tax incentives for small businesses to hire, expanding the Earned Income Tax Credit, and so on.

But what happens next week if Congress can’t or won’t deliver the President a bill to raise the debt ceiling? Remember: This is all politics, mixed in with legal technicalities. Economics has nothing to do with it.

One possibility, therefore, is for the Treasury to keep paying the nation’s bills regardless. It would continue to issue Treasury bills, which are our nation’s IOUs. When those IOUs are cashed at the Federal Reserve Board, the Fed would do what it has always done: Honor them.

How long could this go on without the debt ceiling being lifted? That’s a legal question. Republicans in Congress could mount a legal challenge, but no court in its right mind would stop the Fed from honoring the full faith and credit of the United States.

One of the biggest right wing memes that drives me crazy is that the economy is bad because we have too much taxes still and that the President’s stimulus didn’t work because it was worthless spending.  I knew it wouldn’t do much to stimulate the economy simply because it didn’t take advantage of the government spending multiplier in key areas and wasn’t  big enough.  Also, it was the Biggest Tax Cut Ever which rarely works as efficiently as direct government spending to get consumption going again.  So why are so many idiots arguing that more of the same tax cuts are going to improve the economy and cutting all levels of government spending is considered confidence building when the government spending multiplier will just push recessionary momentum?  You got me.  It’s insanity.

So, what happens if these debt ceilings talk fail?  Well, first, every single financial asset, liability, and contract will reprice all over the world.  Most of them will reprice in a bad way that will hamper economies every where.  Every business project will be evaluated using a risk free rate that will now be higher and will not be considered risk free any more. That means many projects will now be rejected so expansions, new jobs, or anything like that will be rejected.  Remember, this is not because we can’t pay those bills, it’s because a few idiots refuse to pay them. Second, the world will continue to step away from the dollar. Third, there will be strong recessionary pressures. It’s not good, folks. As these recent GDP figures show, we’re far from out of the impact of the last financial shock.

But what if all those options failed? What would be the consequence of even a notional default? The IMF has talked of a global recession if there was a loss of confidence in US solvency although it’s not clear that a failure to roll over debt for a few days would qualify for that description.

Having seen what happened with Lehman’s default, the main worry would be a freeze in the markets. Take the finances of banks, for example. Many use Treasury bonds as the risk-free asset for capital purposes. As Capital Economics points out

“Government debt is only automatically 0% risk-weighted for banks under Basel II if it is rated AA- or higher (although regulators can make exceptions for domestic government debt issued in local currency). In principle, therefore, financial institutions would face significantly higher capital charges in the event of a US government default.In practice, it seems likely that the regulators would move quickly to waive the rules. But there might be a few hairy moments while they did. And what about money-market funds? Having been burned by the credit crunch, many have opted for the safe haven of US Treasury bills. Perhaps they could roll over those bills into some form of IOU from the government. But if investors demanded their money back at a time when Treasury bills were illiquid, money-market funds might be forced to suspend resumptions or “break the buck”. Then there is the repo market, widely used by financial institutions to raise money; Treasury securities are used as collateral for such borrowing.”

Standard & Poor’s has considered this scenario and suggests that

“Failure to pay off maturing debt or missing interest payments (approximately $62 billion of interest is payable on Aug. 15) would constitute a selective default pursuant to our criteria, and Standard & Poor’s expects it would lower the sovereign rating to ‘SD’. Even if the Fed and other central banks managed to keep the financial system functioning, we expect that markets around the world would be severely damaged. In such a hypothetical scenario, we expect that equity markets would generally plunge, borrowing costs and interbank lending rates would soar, and corporate credit markets would be closed to all but the highest quality issuers. We envisage that consumers and businesses would likely stop spending on all but essential items, and the value of the dollar would drop by 10% or more against other major currencies. With the dollar heading lower, investors would likely look for hard assets like oil and other commodities, driving prices higher.Given the fragility of the economic recovery, this is an incredible risk to contemplate. It is also worth noting that, even a freeze on government spending that stopped short of a default, would have a significant impact on demand.”

I still can’t believe that a few people are willing to tank the economy for failed economic hypotheses. It’s as if everything we’ve learned over the past 70 years has been completely thrown to the wind and we’re being run by the myth of Reagan’s ghost.  I say myth because what they’re going on didn’t even happen on his watch. He was responsible for the biggest single tax increase in history and was responsible for a lot of the debt they’re whining about today. Speaking of Reagan, one of his economists–Bruce Bartlett–has an excellent analytical piece up on how the Debt Crisis is being Fueled by Obama’s weak negotiations.  It’s worth a read.

Unfortunately, Obama is really too young to have the kind of experience that previous presidents like Reagan brought to the White House in terms of understanding intransigent enemies and how to deal with them. Consequently, Obama has really been caught flat-footed by the Tea Party era Republican Party. He believed it would respond positively if he offered it half a loaf on just about every issue.

For example, some 40 percent of the 2009 stimulus legislation consisted of tax cuts even though his economic advisers knew that they would have almost no stimulative effect. But Obama viewed them as an important concession to Republicans. Yet despite total rejection of his stimulus package by the GOP, Obama kept the tax cuts rather than reprogramming the money into more effective programs such as state aid or public works.

Nevertheless, Obama offered Republicans another half-loaf  by putting forward a health reform plan almost identical to those that they and conservative groups such as the Heritage Foundation had proposedin the 1990s. Obama’s offer was summarily rejected and Republicans suddenly decided that the individual mandate, which previously had been at the core of their own health reform plans, was unconstitutional.

Now we are in the midst of a debt crisis that stems largely from Obama’s inability to accept the intransigence of his political opponents. Last December, he caved in to Republicans by supporting extension of the Bush tax cuts even though there is no evidence that they have done anything other than increase the deficit. There were those who told Obama that he ought to include an increase in the debt limit, but he rejected that idea, believing that Republicans would behave like responsible adults and raise the debt limit just as they did routinely when their party held the White House.

I join Bartlett, former President Clinton, and others in begging the President to invoke the 14th amendment.  Then, he should find some economics advisers who know what they are doing and listen to them for a change.

Breaking … WSJ Discovers Lack of Demand is behind Weak U.S. Economy

Via Andrew Leonard at Salon, the Wall Street Journal today reported the results of a survey they conducted with 53 economists:

In the survey, conducted July 8-13 and released Monday, 53 economists—not all of whom answer every question—were asked the main reason employers aren’t hiring more readily. Of the 51 who responded to the question, 31 cited lack of demand (65%) and 14 (27%) cited uncertainty about government policy. The others said hiring overseas was more appealing.

Only the conservative WSJ, the President, and Congresss could be surprised by these results. I’m not sure who these 53 economists were, but I think they must have been rather conservative, because the survey found that most did not think the government should do anything more to stimulate the economy.

Despite their forecasts for slow growth and an elevated unemployment rate, the economists aren’t in favor of further action either by the Fed or the federal government. Forty-one economists in the WSJ survey said the central bank shouldn’t pursue another round of bond-buying aimed at reducing interest rates, and thirty-eight said another round of fiscal stimulus shouldn’t be a part of any deficit-reduction package.

Economists added that they hope that as conditions begin to improve, albeit slowly, consumers will become more optimistic. “For whatever reasons, in addition to discrete headwinds, I think we’ve taken a hit to animal spirits and as those headwinds fade sentiment will revive,” said Stephen Stanley of Pierpont Securities. “Optimism can be self-sustaining, but pessimism can also provide a persistent drag.”

If any of the economists the WSJ talked to mentioned the possibility that the government itself could create jobs and thus stimulate demand–as FDR did the last time things were this bad, the WSJ did not report it.

Andrew Leonard crows:

what could be more obvious, even in the absence of rigorous training in economics? In the absence of demand, businesses will refrain from ramping up production and adding staff — no matter what employers think about the future regulatory climate. To prime this pump, to rev up this engine, to get the “delicate machine” working properly, the first focus for economic policymakers should be figuring out ways to boost demand.

Wouldn’t the best way to do that be to create jobs? Even Andrew Leonard doesn’t mention that. It seems ass-backwards to me to talk about getting consumers to spend more in order to get companies to start hiring. How can consumers spend more when many of them are unemployed? Maybe Dakinikat can explain this to me.

Anyway, it’s pretty amazing that the WSJ is admitting we have a demand problem. Now if only they could convince President Obama…

Hey Andy, me ‘n’ Barney didn’t have nuthin’ better to do, so we decided to crash the economy!

Barack O'Gomer and Deputy "Barney" Geithner*

This morning Sky Dancing’s resident economist Dakinikat wrote about Tim Geithner’s latest trial balloon about maybe stopping Social Security checks in August if Congress refuses to raise the debt ceiling. That’s right, he wants to use the trust fund that elderly people paid into all their working lives to pay China and other foreign debtors. Now that’s a brilliant plan boys–throw grandma and grandpa out in the streets to starve and die. It’s genius!

Then while we were all commiserating in the comment thread, we got the jobs report for June: only 18,000 jobs were added, and the phonied-up unemployment rate is now at 9.2%.

O’Gomer dragged his sorry a$$ out to the Rose Garden in late this morning to mumble a few weak excuses.

“Today’s job report confirms what most Americans already know,” Obama said. “We still have a long way to go and a lot of work to do to give people the security and opportunity that they deserve.”

The president tried to lay some blame at Congress’ feet. He said lawmakers could pass a handful of policies today to create jobs. His list included an infrastructure bank, free trade deals and patent reform.

“There are bills and trade agreements before Congress right now that could get all these ideas moving,” he said. “All of them have bipartisan support, all of them could pass immediately, and I encourage Congress not to wait.”

Yeah, patent reform, that’s the ticket! And more trade agreements to create more outsourcing of American jobs. Brilliant! And cutting off Social Security checks! That’s really gonna give Americans “the security and opportunity they deserve.” Who is advising this guy anyway?

Well, one of O’Gomer’s top advisers, David Plouffe, made an unfortunate remark before the jobs report came out. Minkoff Minx wrote about it in her SDB reads earlier this evening. From The Christian Science Monitor:

David Plouffe, Mr. Obama’s top political adviser, got things started Thursday at a breakfast sponsored by Bloomberg News.

“The average American does not view the economy through the prism of GDP or unemployment rates or even monthly jobs numbers,” Mr. Plouffe said. “People won’t vote based on the unemployment rate; they’re going to vote based on: ‘How do I feel about my own situation? Do I believe the president makes decisions based on me and my family?’ ”

Ask yourself, Mr. Plouffe, how do you think most ordinary Americans feels about their situation right about now? O’Gomer’s buddy Timmy Geithner is talking about cutting off Social Security payments. O’Gomer himself is trying to talk the Republicans into cutting Social Security, Medicare, and Medicaid. This administration hasn’t done diddly-squat about jobs except occasionally have O’Gomer mention that we need to create them. Talk is cheap, Mr. Plouffe. Actions speak louder than words as my mom used say.

According to Julian Brookes at Rolling Stone, Plouffe also made this odd assessment:

the president, says Plouffe, has a good shot with independent voters, who’ll reward his bipartisan, bend-over-backwards approach the debt talks; is a seasoned campaigner with a huge war chest; has moved to the center without losing the base (the oft-noted “enthusiasm gap” seems to have closed); and has demographic trends working in his favor (he won big with minorities in 08, and they’ll make up a larger share of the electorate next year). Plus, of course, the GOP field is weak: Frontrunner Mitt Romney is the most formidable of the bunch, but he’s nobody’s idea of a galvanizing standard bearer.

What is wrong with this guy? Does he really believe that Independents like politicians who “bend over backwards” instead of showing some strength? Does he really believe O’Gomer hasn’t lost his base? And the center? O’Gomer has gone so far right he’s out-crazying the Tea Party!

Then there’s William M. Daley, the White House chief of staff. Check out what he recently had to say about Americans’ attitudes about the crappy economy. According to Peter Nicholas at the LA Times, O’Gomer’s main defense is that the middle class was already suffering under Bush, so it’s not really his fault. Never mind that unemployment has gone from 7.8% to 9.2% on his watch. So O’Gomer is asking for more time:

Speaking at a fundraising dinner in Philadelphia last week, he said that the nation’s challenges “weren’t a year in the making or two years in the making, but are actually 10 years in the making.”

But Obama’s nuanced message isn’t breaking through. A Gallup Poll last month showed that Americans’ economic confidence was near its low for the year.

For the White House, it’s tough to get the public to pay attention to anything else.

A Democratic senator spoke by phone recently with White House Chief of Staff William M. Daley. “He said, ‘Honest to goodness, if we’re not talking about jobs and the economy, nobody is listening,’” recalled the senator.

Surprise, surprise, surprise!!

Gee, do you think maybe you ought to stop talking and actually DO something then? Just wait until Grandma finds out she might not get her Social Security check in August. Maybe O’Gomer and his advisers need to get a clue. And find O’Gomer a couple of advisers who know something about economics, Mr. Daley.

*NOTE: The graphic at the top of this post is the work of our old friend StateOfDisbelief.

Forget giving away the store — Obama is handing the store to Republicans and inviting them to burn it down.

Please read this shocking story at The New York Times — there’s no way for me to excerpt all the important parts.

Obama administration officials are offering to cut tens of billions of dollars from Medicare and Medicaid in negotiations to reduce the federal budget deficit, but the depth of the cuts depends on whether Republicans are willing to accept any increases in tax revenues.

Administration officials and Republican negotiators say the money can be taken from health care providers like hospitals and nursing homes without directly imposing new costs on needy beneficiaries or radically restructuring either program.

What this really means is that more doctors and hospitals will refuse to accept Medicare and Medicaid patients, and nursing homes will turn away frail elderly patients who can’t pay out of pocket–because Medicaid will no longer be able to assist those who are poor or have already spent their life savings on health care.

“Congress smells blood,” said William L. Minnix Jr., the chief lobbyist for nonprofit nursing homes.

Mr. Minnix, the president of a trade group known as LeadingAge, is urging nursing homes to “bombard your senators with the message that Medicaid cannot be cut by $100 billion” over 10 years, as President Obama and many Republican lawmakers have suggested.

A coalition of hospital lobbyists, worried about the direction of the budget talks, has begun a national advertising campaign to block further cuts in the two health care programs, which account for about 55 percent of hospital revenues. The hospitals have made a commitment to spend up to $1 million a week through August on television, print and online advertising.

Now check this out: Chuck Schumer, supposedly a Democrat, is quoted in the article as saying, “We are very willing to entertain savings in Medicare. Medicare gives very good health care very inefficiently.”

Really? Medicare has almost no overhead, and it pays way below the going rate for health care services. That’s why so few private doctors accept Medicare patients right now.

Now think about what Dakinikat has told us about the dangers of cutting federal spending and read this:

Medicare and Medicaid insure more than 100 million people, account for 23 percent of all federal spending and are likely to be an important part of any budget deal. Military spending, which accounts for about 20 percent of federal expenditures, is likely to be included as well.

President Obama and his Republican pals are on a mission to bring down the American economy and bring on a repeat of the Great Depression. Can anything or anyone stop them? We need riots in the streets, but can elderly people do it alone?